Nonprofit Law/group exemption


I am president of a 501(c)3 cultural organization. A dance ensemble in our area has asked if we could serve as their umbrella non-profit organization.  They are currently umbrella'd under another non-profit organization with different type of mission. They want to switch because we have a related mission and are apolitical. Can they switch to another umbrella organization? Do we/they have to file any paperwork to do so?

I appreciate your feedback!

The IRS does not accept the use of the term "umbrella" when referring to the relationship between two entities.  If that dance ensemble is part of a group exemption, let me know.  Group Exemption is discussed starting on the bottom of the middle column of page 8  of IRS Publication 557 at

I will now, though, assume that they are not  part of group exemption but have only contracted with a 501(c)(3) organization (other than yours).  If there is nothing in the contract to prevent them from terminating that contract, then there is no reason that they could not contract with your organization instead.  Note, however, that there may be an issue with that. In one paper, from 1994, at
the IRS states, on page 16 "Fiscal sponsorship is an area of
current concern for the Service... fiscal sponsorship occurs when
one or more charities choose to financially support another charity
or nonexempt project."  One page 17 the IRS elaborates, "A
nonexempt project, as used in this context, is a charitable
activity of an organization that does not have an IRS determination

See also, which
is an IRS publication about prohibited conduit arrangements.

I would be willing to work on the drafting of the contracts, but I would need to spend a substantial amount of time and that would be beyond the scope of my offer of free services.  If you want to inquire about hiring me for such work, please contact me directly to the email address below.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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